Sri. Ranjeeth Kumar Bothra, Bangalore V. Income Tax Officer, Ward- 2(2)(5), Bangalore

ITA 1569/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8503 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 02-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: STANDING COUNCIL
• Assessee Lawyers: ROHIT GOWTHAMCHAND
• Keywords: Unexplained cash credit; Principle of natural justice; Earning of tax free income; Accommodation entries; Onus to prove; Set aside; Capital Gains
• Section: 131; 68; 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1569/BANG/2019 : ASST.YEAR 2015-2016 SRI.RANJEET KUMAR BOTHRA PROP. M/S.TRIVENI SANGAM NO.44, MH PLAZA, GROUND FLOOR, MAMULPET BANGALORE 560 053. PAN : ABZPB5770A. VS. THE INCOME TAX OFFICER WARD 2(2)(5) BANGALORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.ROHIT GOWTHAMCHAND, CA RESPONDENT BY : SRI.GANESH R.GHALE, STANDING COUNCIL FOR DR DATE OF HEARING : 21.01.2020 DATE OF PRONOUNCEMENT : 21.01.2020 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), DATED 30.04.2019. THE RELEVANT ASSESSMENT YEAR IS 2015-2016. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM BUSINESS, HOUSE PROPERTY, CAPITAL GAINS AND OTHER SOURCES. THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16 ON 16.09.2015 DECLARING A TOTAL INCOME OF RS.13,72,420 AND AN EXEMPTED INCOME (LONG TERM CAPITAL GAINS ON SALE OF SHARES U/S 10(38) OF THE ACT, 1961 ) OF RS.15,77,000 AND PPF INTEREST OF RS. 1,05,935. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) ON 29.12.2015 AND WAS SELECTED FOR COMPLETE SCRUTINY UNDER CASS. NOTICE U/S 143(2) WAS ISSUED ON 28.07.2016. SINCE THERE WAS A CHANGE IN INCUMBENT, NOTICE U/S 129 R/W 142(1) OF THE ITA NO.1569/BANG/2019 SHRI RANJEET KUMAR BOTHRA. 2 INCOME TAX ACT WERE ISSUED CALLING FOR DETAILS. THE ASSESSEE HAD PURCHASED 70,000 SHARES OF M/S MIDLAND POLYMERS LIMITED, A LISTED COMPANY ON THE BSE, FOR A CONSIDERATION OF RS.1,99,500 IN PHYSICAL FORM ON 26.03.2012 FROM M/S ANURODH INFRASTRUCTURE PVT. LTD., 319/21, JESSORE ROAD, KHUDIRAM COLONY, KOLKATA AND PAID RS.2,00,000 WHICH IS INCLUSIVE OF RS.500 PAID AS COMMISSION. THE AMOUNT WAS PAID BY CHEQUE NO. 069128 DATED 26.03.2012 DRAWN ON BANK OF MAHARASHTRA. THE ASSESSEE HAD SOLD 70,000 SHARES IN NOVEMBER 2014 THROUGH HIS DEMAT ACCOUNT AT A RECOGNISED STOCK EXCHANGE THROUGH A REGISTERED STOCK BROKER AND THE SHARES ALSO SUFFERED SECURITIES TRANSACTION TAX. THUS, THE ABOVE TRANSACTION WAS GROSSLY COVERED U/S 112 OF THE ACT, 1961 AND THE GAIN WAS EXEMPT U/S 10(38). THE APPELLANT HAD EARNED A LONG TERM CAPITAL GAIN OF RS. 15,77,000 AND THEREFORE CLAIMED IT AS AN EXEMPT INCOME U/S 10(38) OF THE ACT. THE ASSESSING OFFICER CLAIMED THAT THE SCRIPTS OF MIDLAND POLYMERS LIMITED HAD BEEN MANIPULATED AND SEBI HAD ISSUED DIRECTIONS TO SUSPEND THEIR TRADING CONSIDERING THEM AS 'PENNY STOCK SCRIPTS' W.E.F., 04.03.2015. THE ASSESSING OFFICER HAD ALSO RECORDED A SWORN STATEMENT OF THE A ASSESSEE U/S 131 OF THE INCOME TAX ACT, 1961 WHERE THE ASSESSEE HAD CLARIFIED THE TRANSACTION BEING BONAFIDE AND GENUINE. THE ASSESSING OFFICER THEN ISSUED A SHOW CAUSE NOTICE FOR TREATING THE GAIN EARNED AS 'UNEXPLAINED CASH CREDITS U/S 68 FOR WHICH THE ASSESSEE REITERATED AND CLARIFIED THAT THE TRANSACTIONS MADE BY HIM WERE BONAFIDE AND CARRIED OUT THROUGH BANKING CHANNELS. FURTHER, ALL DOCUMENTARY EVIDENCES WERE FURNISHED TO PROVE THE ITA NO.1569/BANG/2019 SHRI RANJEET KUMAR BOTHRA. 3 GENUINENESS OF THE TRANSACTION. THE HIKE IN THE SHARE PRICES OF M/S. MIDLAND POLYMERS LIMITED WAS NOT EXORBITANT OVER THE GIVEN TIME FRAME OF TWO AND HALF YEARS. THE ASSESSEE OBJECTED TO THE SCN VIDE REPLY DATED 23.11.2017 CLEARLY SPELLING OUT REASONS WHY THE SAME WERE NOT TO BE TREATED AS 'UNEXPLAINED CASH CREDITS' ULS 68 OF THE ACT, 1961. THE ASSESSEE IN ORDER TO DISCHARGE THE PRIMARY ONUS CAST ON HIM, FURNISHED ALL THE DOCUMENTS, EXPLANATIONS AND INFORMATION AS REQUIRED BY THE INCOME TAX OFFICER, DURING THE COURSE OF ASSESSMENT WHICH WAS COMPLETED BY THE ASSESSING OFFICER AFTER NUMEROUS HEARINGS ON 18.08.2016, 04.10.2016, 02.06.2017, 15.06.2017, 17.11.2017 AND 23.11.2017 WITH THE AUTHORIZED REPRESENTATIVE, SRI. S GOUTAMCHAND. HAVING FURNISHED THE DOCUMENTARY EVIDENCES AND THEREBY DISCHARGING THE ONUS OF PROVING THE 'GENUINENESS OF THE TRANSACTION' AND 'ELIGIBILITY OF TREATING THE GAIN AS EXEMPT' TO THE INCOME TAX OFFICER, THE ONUS HAD SHIFTED FROM THE APPELLANT TO THE DEPARTMENT TO PROVE THAT THE APPELLANTS TRANSACTIONS WERE A MERE SHAM. HOWEVER, DISREGARDING THE ABOVE MENTIONED EVIDENCES AND PROOFS FURNISHED BEFORE HIM, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER ALONG WITH A DEMAND NOTICE FOR A SUM OF RS.6,47,800 DATED 27.11.2017 WHICH WAS SERVED ON US ON 12.12.2017. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPROACHED THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 TO SEEK RELIEF OF THE ADDITION MADE TO THE ASSESSED INCOME. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) ITA NO.1569/BANG/2019 SHRI RANJEET KUMAR BOTHRA. 4 HAS CONFIRMED THE SAME AND HAS NOT ALLOWED THE EXEMPTION OF RS. 15,77,000 UNDER SECTION 10(38) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL, RAISING FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED ASSESSING OFFICER, IN SO FAR AGAINST THE APPELLANT IS OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES AND THE FACTS AND CIRCUMSTANCES IN THE APPELLANT'S CASE. 2. THE APPELLANT HAS PROVIDED ALL DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF HIS TRANSACTIONS AND THUS HAS SHIFTED THE BURDEN OF PROOF ON THE DEPARTMENT. THE LEARNED ASSESSING OFFICER HAS HOWEVER, BEEN UNABLE TO PROVE ITS STANCE. 3. THE APPELLANT DENIES TO BE ASSESSED ON AN INCOME OVER AND ABOVE THE RETURNER INCOME OF RS. 13,72,420/- AND PLEADS TO ALLOW THE GAIN ON SALE OF SHARES OF RS.15,77,000/- AS EXEMPT U/S 10(38) OF THE ACT, 1961 SINCE ALL THE REQUISITE CONDITIONS FOR CLAIMING EXEMPTION ARE FULFILLED AND THE TRANSACTIONS ARE BONAFIDE. 4. THE LEARNED AO HAS MADE ADDITIONS BY GIVING REFERENCE TO THE ARBITRARY EXAMINATION OF MR. HARSHVARDHAN KAYAN BY THE INVESTIGATING OFFICER, WHO WAS STOCK BROKER, AND HAD SUPPOSEDLY ADMITTED TO HAVE PROVIDED 'SOME' ACCOMMODATION ENTRIES. THE LD. AO HAS WRONGLY CONCLUDED THAT THE APPELLANT HAD ENTERED INTO TRANSACTIONS THAT WERE PART OF THOSE ACCOMMODATION ENTRIES AN ACT OF CONNIVANCE AND SCHEMING WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 5. AN UNTESTED STATEMENT / INQUIRY OF A PARTY BEHIND THE BACK OF THE APPELLANT WOULD BE AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND BAD IN LAW. THUS, THE APPELLANT SHOULD BE GRANTED AN OPPORTUNITY OF CROSS EXAMINING THE PARTIES INVOLVED BASED ON WHOSE STATEMENTS, THE LEARNED AO HAS MADE THE UNJUST ADDITIONS TO THE ORIGINALLY ASSESSED INCOME. 6. THE APPELLANT HAD REQUESTED THE LEARNED AO TO PROVIDE HIM WITH THE SWORN STATEMENTS OF THE PARTIES ON WHOSE STATEMENTS THE LEARNED AO HAS BASED HIS JUDGEMENTS. NEITHER WAS THE APPELLANT PROVIDED WITH AN OPPORTUNITY TO CROSS- EXAMINE THE OTHER PARTIES NOW WAS HE PROVIDED WITH THEIR SWORN STATEMENT RECORDED BY THE INVESTIGATIONS WING WHICH IS UNJUST AND BAD IN LAW. ITA NO.1569/BANG/2019 SHRI RANJEET KUMAR BOTHRA. 5 7. THE LEARNED INCOME TAX OFFICER HAS OVER-RELIED ON THE GENERIC FINDINGS AND INFORMATION OF THE INVESTIGATION WING WHICH HAS NO NEXUS TO THE APPELLANT'S CASE HAS AND DISREGARDED ALL THE DOCUMENTARY EVIDENCES AND PROOFS FURNISHED BEFORE HIM. 8. THE LEARNED INCOME TAX OFFICER HAS ERRED IN ASSESSING THE GAIN OF THE APPELLANT U/S 68 UNEXPLAINED CASH CREDITS' OF THE ACT,1961 WHEREAS THE PARTICULAR TRANSACTIONS OF THE APPELLANT DOES NOT FULFIL ANY OF THE PRE-REQUISITE CONDITIONS THAT ARE REQUIRED TO LEVY THE PROVISIONS OF THAT SECTION. 9. THE LEARNED AO HAD MADE A FEW ERRONEOUS STATEMENTS AND OBSERVATIONS IN HIS ASSESSMENT ORDER BASED ON WHICH THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO CONFIRMED THE ADDITION. HOWEVER, THE STATEMENTS MADE WERE UNTRUE THUS, DELUDING THE JUDGEMENT OF THE COMMISSIONER (APPEALS). 10. THE ADDITION HAS BEEN MADE BY GROSSLY INDULGING IN CONJECTURE AND SURMISES WITHOUT THERE BEING ANY DIRECT ADVERSE MATERIAL AGAINST THE APPELLANT, BASED ONLY ON SUSPICION. THE APPELLANT RESERVES THE RIGHT TO ADD, DELETE OR MODIFY ANY GROUND AT THE TIME OF HEARING. 5. AFTER HEARING BOTH THE SIDES AND PERUSING THE MATERIAL ON RECORD, I FIND THAT SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF SHRI. KIRTI K.BHANSALI V. ITO FOR ASSESSMENT YEAR 2008-2009 IN ITA NO.105/BANG/2019. VIDE ORDER DATED 24.05.2019, THE TRIBUNAL HELD AS UNDER:- 4.3.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FIRST OF ALL, I REPRODUCE PARA NO.8 OF THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF M/S. CHANDRA DEVI KOTHARI (SUPRA) AND THIS IS AS UNDER: 8. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES AS ADVERTED TO ABOVE AND AS THE PETITIONER HAS BEEN DENIED AN OPPORTUNITY OF FAIR HEARING BY PROVIDING COPY OF THE STATEMENT AND RELATED DETAILS REGARDING THE ALLEGED SHARE AMOUNT, I AM OF THE VIEW THAT THE MATTER REQUIRES TO BE RE- CONSIDERED BY THE RESPONDENT BY PROVIDING FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE PETITIONER AND BY ITA NO.1569/BANG/2019 SHRI RANJEET KUMAR BOTHRA. 6 FURNISHING THE DETAILS / COPY OF THE STATEMENT BASED ON WHICH THE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED. 4.3.2 FROM THE ABOVE PARA FROM THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT, IT IS SEEN THAT MATTER WAS RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER PROVIDING COPY OF THE STATEMENT OF SHRI MUKESH CHOKSI AND OTHER RELATED DETAILS. AS PER THE FACTS NOTED BY THE HIGH COURT IN THE EARLIER PARAS OF JUDGMENT (SUPRA) AND AS PER THE FACTS OF THE CASE ON HAND, THERE APPEARS TO BE NO DIFFERENCE IN FACTS AND THEREFORE BY RESPECTFULLY FOLLOWING THIS JUDGMENT IN THE CASE OF CHANDRA DEVI KOTHARI (SUPRA), I SET ASIDE THE IMPUGNED ORDERS OF LEARNED CIT(A) FOR ASSESSMENT YEAR 2008-09 AND RESTORE THE MATTERS TO THE FILE OF THE AO FOR FRESH DECISION WITH THE SAME DIRECTIONS AS WERE ISSUED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE AS PER PARA NO.8 OF THE JUDGMENT REPRODUCED ABOVE. IN VIEW OF THIS DECISION, NO ADJUDICATION IS CALLED FOR AT THIS STAGE REGARDING THE MERITS OF THE ADDITION. 6. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, I INCLINED TO REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH WITH SIMILAR DIRECTIONS AS HELD BY THE TRIBUNAL IN THE CASE OF SHRI.KIRTI K.BHANSALI (SUPRA). 6.1 IN VIEW OF THE ABOVE, I AM NOT INCLINED TO COMMENT UPON ANY OTHER GROUNDS OF APPEAL ON MERITS OF THE ISSUE AT THIS STAGE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 21 ST DAY OF JANUARY, 2020 . SD/- ( CHANDRA POOJARI ) ACCOUNTANT MEMBER BANGALORE ; DATED : 21 ST JANUARY, 2020. DEVADAS G* ITA NO.1569/BANG/2019 SHRI RANJEET KUMAR BOTHRA. 7 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-2, BENGALURU. 4. THE PR.CIT-2, BENGALURU. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE